Last updated: November 2026.
If you run a business and need a ute, van or equipment, the finance you choose affects your GST, your tax claims and what you owe at the end. A chattel mortgage is the structure most Australian business owners use, and it is the one we arrange most often for tradies and small businesses across the Hills District.
What is a chattel mortgage?
A chattel mortgage is a business loan used to buy a vehicle or equipment, where your business owns the asset from day one and the lender takes a mortgage over it as security. "Chattel" is an old legal word for movable property. You make fixed repayments over a set term (commonly 1 to 7 years), you can add a balloon payment at the end to lower those repayments, and the lender's security is removed once the loan is paid out.
That ownership is what opens the door to the GST and tax claims below. RyRo arranges chattel mortgages through our business and equipment finance team, comparing a panel of lenders rather than one bank's product.
Who a chattel mortgage suits
A chattel mortgage usually fits if:
- You have an ABN (sole trader, partnership, company or trust)
- The vehicle or equipment will be used more than 50% for business, which is where lenders treat the loan as commercial rather than consumer credit
- You want to own the asset, not rent it
- You want fixed repayments with the option of a balloon
Think of a Kellyville electrician buying a dual-cab ute or a Castle Hill cleaning business adding a van. If the vehicle is mainly for family use, a consumer secured car loan is the honest fit. Self-employed and worried about paperwork? Our guide to ABN and low doc car loans for the self-employed covers how lenders assess you.
How does a chattel mortgage work?
- You choose the vehicle from a dealer or, with some lenders, a private seller.
- The lender pays the seller the full price, usually including GST and on-road costs.
- Your business owns the vehicle and it is registered in your name or the business's name.
- The lender registers its security interest on the Personal Property Securities Register (PPSR).
- You repay in fixed monthly instalments, then pay any balloon at the end.
- The security is released once the loan is fully paid.
Balloon or residual payments
A balloon is a lump sum left owing at the end of the term. It lowers your monthly repayments, but you pay more interest overall because the balance stays higher for longer. Lenders cap the balloon size, and the cap generally shrinks as the term gets longer or the vehicle gets older. Some only offer balloons on new or near-new vehicles.
At the end you pay the balloon in cash, refinance it, or sell or trade the vehicle to clear it. A balloon can become a cash flow problem in year five if the vehicle is worth less than you owe. Test a few scenarios in our loan repayment calculator before you commit.
Chattel mortgage tax and GST points for 2026-27
RyRo arranges the finance, not tax advice. These are general points from the ATO, so check with your accountant before you sign.
GST credit on the purchase price. A GST-registered business buying a vehicle for business use can generally claim a GST credit for the business-use share of the price. Because a chattel mortgage is a purchase, the credit is typically claimed on the BAS for the period you buy, not spread across repayments. For cars, the ATO caps the credit at one-eleventh of the car limit: $6,353 for 2026-27. There is no credit on luxury car tax.
The car limit. The ATO car limit is $69,883 for 2026-27 (up from $69,674 in 2025-26). It is the maximum cost you can use to work out depreciation on a passenger vehicle. Some vehicles, such as certain utes and vans designed to carry a tonne or more, aren't "cars" under these rules, so the limit may not apply. Your accountant will confirm which side yours sits on. Luxury car tax thresholds for 2026-27 are $80,809, or $91,661 for fuel-efficient vehicles.
Interest and depreciation. Because the business owns the asset, it can generally claim the business-use share of the loan interest and the vehicle's depreciation. Loan interest carries no GST.
The instant asset write-off. Small businesses with aggregated turnover under $10 million can immediately write off eligible assets costing less than $20,000 each. The threshold was $20,000 in 2025-26, and the ATO says it is permanent from 1 July 2026. Assets costing $20,000 or more go into the small business pool, depreciated at 15% in the first year and 30% after. Most work vehicles cost well over $20,000, so the pool is usually the relevant rule, while a trailer might qualify for the write-off.
A worked example (illustrative only)
Say you are a GST-registered electrician in the Hills District. You buy a new dual-cab ute for $66,000 drive-away, including $6,000 GST, and your logbook shows 90% business use. You take a 5 year chattel mortgage for the full amount with a 30% balloon. These figures are hypothetical and rounded, and the rate is an assumption, not a quote.
| Item | Illustrative figure |
|---|---|
| Amount financed | $66,000 |
| Interest rate (assumed) | 8.5% p.a. |
| Term | 5 years |
| Balloon at end (30%) | $19,800 |
| Monthly repayment | About $1,088 |
| Monthly repayment with no balloon | About $1,354 |
| Total interest over the term | About $19,090 |
| GST credit (90% of $6,000) | About $5,400, usually on the next BAS |
| Year one interest, business share | About $4,780 |
| Year one depreciation (small business pool) | About $8,180 |
Depreciation here is the price less the GST credit ($60,600), times 90% business use, times the 15% first-year pool rate. Your actual tax benefit depends on your marginal rate and structure.
Want these numbers run on your actual quote? Book a free strategy call and we will model the repayment, balloon and term across our lender panel.
Chattel mortgage vs car loan
The tax treatment follows who owns the vehicle and how it is used, not the label on the loan. A chattel mortgage is simply the structure built for business ownership.
| Chattel mortgage | Consumer car loan | |
|---|---|---|
| Who it's for | ABN holders, business use over 50% | Individuals, mainly personal use |
| Credit type | Commercial, outside the National Credit Code | Consumer, regulated with responsible lending checks |
| Ownership | Your business, from day one | You, from day one |
| GST on purchase | Business share generally claimable if GST-registered | Generally not, as use is mainly private |
| Interest and depreciation | Business share generally deductible | Usually not |
| Paperwork | Can be lighter for established ABNs | Payslips or full income verification |
A consumer secured car loan carries stronger legal protections, such as hardship rights under the National Credit Code. If the vehicle is the family car with occasional work trips, stay consumer.
Chattel mortgage vs finance lease, hire purchase and novated lease
Finance lease. The lender owns the asset and rents it to your business for a fixed term, with a residual at the end. Lease payments are generally deductible for the business share, and GST is claimed on each payment rather than upfront. It can suit businesses that may hand the asset back.
Hire purchase. The lender owns the asset until the final payment, then ownership passes to you. For agreements since 1 July 2012, the ATO treats the whole supply as taxable and generally allows the GST credit upfront, so it behaves a lot like a chattel mortgage.
Novated lease. An employee arrangement, paid from your salary, partly pre-tax. Our guide to car loan vs novated lease vs dealer finance covers it in detail.
A chattel mortgage also counts against your future home loan borrowing power, so read how to increase your borrowing power in 2026 if property is on the horizon. To line up lenders before you shop, get in touch.
Ready to set up your chattel mortgage?
RyRo Loan Centre arranges chattel mortgages, commercial car loans and equipment finance for tradies and business owners across Sydney. Our Norwest mortgage and finance broker team compares lenders, structures the term and balloon around your cash flow, and works alongside your accountant on the tax side.
Book a free strategy call before you sign at the dealership, and we will show you the repayments on your actual vehicle.
This article is general information only and is not financial, tax or legal advice. It doesn't take your personal circumstances into account. Speak with your accountant about tax and GST, and consider whether a product suits you before applying. Lender criteria vary and approval is not guaranteed.
Quick answers
Frequently asked questions
A chattel mortgage is a business loan for buying a vehicle or equipment. Your business owns the asset from day one, and the lender holds a security interest over it until the loan is repaid. You can add a balloon to keep repayments lower. RyRo's business finance team compares chattel mortgage options across a panel of lenders.
For a vehicle used mainly for business, usually yes, because a chattel mortgage is designed for business ownership, balloons and GST-inclusive financing. For a mainly private vehicle, a consumer car loan is the right product and comes with stronger consumer protections. The tax treatment follows ownership and business use, so check your business-use percentage with your accountant first.
If your business is GST-registered and uses the vehicle for business, you can generally claim a GST credit for the business-use share of the purchase price, usually on the BAS for the period of purchase. For cars, the ATO caps the credit at one-eleventh of the car limit, which is $6,353 for 2026-27. Loan interest has no GST. Confirm the claim with your accountant.
The ATO car limit for 2026-27 is $69,883, up from $69,674 in 2025-26. It is the maximum cost you can use to work out depreciation on a passenger vehicle, and it caps the GST credit on a car at one-eleventh of that amount. Some vehicles designed to carry a tonne or more fall outside the car limit rules, so ask your accountant how yours is treated.
Only if the vehicle costs less than $20,000 and your business has aggregated turnover under $10 million. The ATO says the $20,000 threshold is permanent from 1 July 2026. Most work vehicles cost more, so they usually go into the small business pool, depreciated at 15% in the first year and 30% after. Smaller assets like trailers may qualify.
Not always. Many lenders will write a chattel mortgage for any ABN holder using the asset mainly for business. Some want GST registration for their lighter documentation options, and you can only claim the GST credit if you are registered. Below the $75,000 threshold, ask your accountant whether registering makes sense.
With no balloon, the final repayment clears the loan and the lender removes its security interest from the PPSR. With a balloon, you pay the lump sum, refinance it, or sell or trade in the vehicle to cover it. Plan early, because the vehicle may be worth less than the balloon by then.
Terms commonly run from 1 to 7 years, with 3 to 5 years the most popular. What you can get depends on the lender, the vehicle's age and the size of any balloon. A longer term lowers the repayment but increases total interest. Model a few options in our loan repayment calculator to see the trade-off.
